A Wave of Earnings Restatements Slams a Hot Market

- Advertisement -

More than 540 companies have restated their financial accounts in the past three months, higher than every full year since 2013, to comply with a directive from Washington, new data show.

The guidance from the Securities and Exchange Commission hasn’t had a big impact on investors but has helped cause a big slowdown in one of the market’s hottest areas.

The SEC’s statement targeted special-purpose acquisition companies, saying in April that some were improperly accounting for warrants. The guidance took the market by surprise, according to analysts. Issuance of SPACs has tumbled since. What’s more, some SPACs used the restatements to disclose other more serious problems.

SPACs, or blank-check companies, are shells that raise money and list on an exchange, with the goal of merging with a private firm and taking it public. Many issue warrants as part of the fundraising, giving investors the right to buy stock in the new entity created by the merger at an arranged price. The warrants are seen as an important inducement for investors in what are typically high-risk early-stage companies.

For years, SPACs and companies that had merged with SPACs treated these warrants as equity in their financial statements. The SEC in April said certain features of many of the warrants, such as better terms being offered to sponsors than outside investors, meant they should instead be treated as liabilities. One reason is that there is the potential for a cash payout in some circumstances.

Latest news

While you were sleeping: How Canada performed Wednesday, Thursday at Tokyo Olympics – National

Canada won its first rowing medal at the Tokyo Olympics on Thursday, continuing the women athletes’ dominance in these Summer Games. Here’s what else you...

U.S. Stock Futures Edge Up Ahead of Jobless Figures, GDP Data

U.S. stock futures edged up ahead of data that are expected to show a decline...

Australian Olympic track team isolating after U.S. athlete tests positive for COVID-19 – National

American double world champion pole vaulter Sam Kendricks and German Chiaraviglio of Argentina have been ruled out of the Olympics after testing positive for...

Credit Suisse Report Pins Archegos Disaster on ‘Fundamental Failure of Management and Controls’

Credit Suisse Group AG said top employees failed to act on numerous warning...
Related news

While you were sleeping: How Canada performed Wednesday, Thursday at Tokyo Olympics – National

Canada won its first rowing medal at the Tokyo Olympics on Thursday, continuing the women athletes’ dominance in these Summer Games. Here’s what else you...

U.S. Stock Futures Edge Up Ahead of Jobless Figures, GDP Data

U.S. stock futures edged up ahead of data that are expected to show a decline...

Australian Olympic track team isolating after U.S. athlete tests positive for COVID-19 – National

American double world champion pole vaulter Sam Kendricks and German Chiaraviglio of Argentina have been ruled out of the Olympics after testing positive for...

Credit Suisse Report Pins Archegos Disaster on ‘Fundamental Failure of Management and Controls’

Credit Suisse Group AG said top employees failed to act on numerous warning...

LEAVE A REPLY

Please enter your comment!
Please enter your name here